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Until a comprehensive target is introduced across Europe, each country can choose its own system to encourage biofuels use - some of which are better than others

Under the current EU biofuels directive member states have developed their own support policies to promote the use of biofuels. A harmonised single European biofuel implementation policy therefore does not exist. In this respect the... EU is very much a patchwork. Member states need to set their own national target, ideally identical to the European one (5.75% by 2010) and to develop instruments to achieve this target.

The directive leaves it up to the member states to develop and use those instruments they consider best. Some member states use financial incentives to make the use of biofuels more attractive such as tax breaks. Others simply put in place an obligation in terms of achieving the national target set.

Some member states have combined all three measures. The various national systems also vary with respect to the openness of their markets, some systems result in a closed market with limited access from outside producers, whereas other markets are less restrictive.

Some member states even have strict conditions on the quality of the fuel. The biofuels directive has now been in place for five years, so it is a good time to highlight some combinations which are delivering the best results in terms of achieving the national target. [read more]

We talk to little-known 3B Biofuels, whose plant is set to become one of Europe's largest

World commodity markets remain volatile and unpredictable, financial and investment markets are currently paralysed, regulatory and legislative environments are very unclear and there has been a great deal of negative press. However, one independent biodiesel business in Europe seems to shrug all this off... and continues to forge ahead.

3B Biofuels, or Babcock and Brown Biofuels, is jointly owned by Babcock and Brown (B&B) and Babcock and Brown Global Partners, part of a large fund and asset management group. B&B made its first acquisition in biofuels in July 2007 in northern Germany, a biodiesel plant, known previously as Marina, which was owned by hundreds of farmers.

While it has existing interests in other renewable infrastructure such as wind, solar and biogas and is now looking closely at biomass and algae, B&B felt confident that biodiesel would play an important, future role in Europe and spent two years looking for the right facility. Now, more than one year on, it is looking to expand its capacity and in time, will add to its portfolio to compliment the trading activities of its Brunsbüttel plant. [read more]

Although 2008 has not been an easy year for producers, many are overcoming the difficulties to bring plants back online, and continue expansion plans

There's a natural life cycle for new technologies, during which they may move from being feted to hated until, finally, they are accepted.

Biofuels producers are currently enduring one of the least pleasant phases of this life cycle: in less... than two years the industry has gone from hero to zero. The industry now finds itself the international whipping boy for everything from rainforest degradation to third world hunger while former political allies have turned hostile and subsidised imports have swamped once-buoyant markets in western Europe.

Western Europe is an important market for biofuels, with the EU biodiesel industry leading the world with output of 5.3 million tonnes in 2007, 68% of worldwide production. Bioethanol volumes are smaller, with total EU production in 2007 coming in at 1.4 million tonnes last year.

Both markets saw a marked slowdown in growth in 2007 as producers felt the pinch of high feedstock prices, cheap imports and political uncertainty. Bioethanol growth, for example, which had been running at rates of over 70%, shrank in 2007 to 11.2% as seven of the 13 producing member states saw production decline and a number of companies across the sector mothballed production or scrapped expansion plans in response to adverse market conditions.

In 2007 only about 45% of the available capacity was used as high grain prices, particularly wheat, took their toll on production economics, a situation compounded by cheaper imports from Brazil. It is a similar story in the biodiesel market, where the rate of growth has contracted from 65% in 2005 and 54% in 2006 to just 16.8% last year. [read more]

Market conditions in Europe have been anything but encouraging over the past year or so. Many plants are not getting past the planning stages, while others are being scaled down, crippled by rising feedstock prices.

A clear example of this is occurring in Germany, a country experiencing two extremes. Multiple biofuels plants are either planned or in construction, yet the Government is being... less than supportive. Its plans to increase taxes on biodiesel in January 2009 to â?¬0.21 a litre, from â?¬0.15. This is the next stage of its programme to raise taxes on green fuels to the same level as fossil fuels.

As a result the country has seen several shutdowns this year, and other producers are working at capacities well below commercial break-even levels. A similar situation appears in Spain, where in 2007, the Spanish renewable energy association APPA declared that of 60+ announced plant projects a significant proportion may never be built. [read more]

Producers must adapt to constantly changing market situations in order to survive

Five years ago, a biofuels revolution was born in Europe from ambitious environmental, energy security and national security policies. Starting with the EU's Biofuels for Transport initiative in 2002, this revolutionary policy ideology took root in the US in 2005 with the birth of the Renewable Fuels Standard... under the Energy and Independence Security Act. Not long thereafter, several countries, including India and China were soon following suit, and enacting policies aimed at reducing pollution, dependence on foreign oil, and producing renewable sources of transport fuels.

These revolutionary biofuels initiatives were met with great enthusiasm and government support in the form of mandates, subsidies, tax incentives, and large R&D initiatives. In the EU and the US, these initiatives and tax benefits accelerated market biofuels market growth to impressive levels in just a few years.

At this time in both the EU and US markets, affordable feedstock prices, generous subsidies and favourable tax incentives spawned investment and development in hundreds of new biodiesel and ethanol refineries. But in a short period of time, the biofuels industry moved from Woodstock to Wall Street; and from a few dozen grass roots initiatives to hundreds of industrial-scale enterprises.

As the enthusiasm grew to new heights in late 2006, the EU and the US markets witnessed the first signs of growing pains. In early 2007, the EU Commission soon realised that the increasing aggregate capacities of the biofuels industries were growing beyond the agricultural capacities of available European arable lands to supply the booming industry. [read more]